Summary bill: https://www.congress.gov/bill/119th-congress/house-bill/1/summary/00
Complete bill: (in case you want to read further into each section) https://www.congress.gov/bill/119th-congress/house-bill/1/text
I believe this is a bill that everyone should read. It covers many things that are not exactly tax-related but can have an impact on your wallet or the wallet of someone you may know. There are changes to SNAP, student college loans and restrictions on Parent Plus loans along with Pell grants, Affordable Care Act changes, Federal Employees’ Retirement System (FERS) and so forth. However, unless it directly affects your tax return, I will not address them.
Following is a summary (as the actual bill is over 900 pages) of tax-related matters in the bill:
- While the individual tax rates of 10%, 12%, 22%, 24%, 32%, 35% and 37% are not changing, it has been noticed that the income levels are shifting into higher brackets.
- The increased standard deduction is made permanent and allows for increase of $1,000.00 ($2,000.00 joint and $1,500.00 for head of household filers) through 2028. There is a 2030 plan to keep an eye on as well.
- Personal exemptions is permanently repealed.
- Increases to maximum amount of child tax credit to $2,500.00 per qualifying child through 2028 and extends the maximum amount of child tax credit to $2,000.00 beginning 2029. In 2029, there will be inflation adjustments to the maximum amount of child tax credit.
Also makes permanent the phaseout of the credit at $200,000.00 ($400,000.00 joint), the $500 nonrefundable child tax credit for each dependent not a qualifying child) and refundable portion of the credit for certain taxpayers
- The Qualified Business Income deduction (QBI) increased to 23%, up from 20%. It modifies limitations on the QBI deduction based on W2 wages, investments and other types of income
- Increasing the estate tax, gift tax and generation-skipping transfer tax exemption to $15 million from $5 million (this was surprising)
- Permanent ATM (alternative minimum tax exemption) increase and phaseout threshold
- Permanently limits the mortgage interest deduction.
- Permanently limits the unreimbursed personal casualty losses associated with federally declared disasters
- Permanently eliminates the miscellaneous expenses when itemizing
- Reestablishes the Pease limitation which limits itemized deductions for higher income earners
- Above the line deduction of qualified tip income for individuals with earned income that does not exceed $160,000.00 in 2025. Must have a work-eligible SSN for themselves and spouse.
- $12,500.00 above line deduction for overtime if income is below $160,000.00 in 2025 and adjusted annually for inflation again must have a work-eligible SSN for themselves and spouse
- $4,000.00 increase for additional standard deduction (and itemizing) per individual through 2028 for those that are 65 or older if adjusted gross income is less than $75,000.00 ($150,000.00 filing jointly)
- New above the line tax deduction of up to $10,000.00 for interest paid on passenger vehicles purchased between 2025 and 2028 for personal use for adjusted gross income less than $100,000.00 ($200,000.00 jointly)
- Expansion of expenses eligible for tax-free withdrawals from 529 qualified tuition programs to include expenses related to elementary, secondary and homeschool education.
- Up to a $150.00 ($300.00 joint) tax deduction for charitable contributions for those that do not itemize
- Trump accounts are for individuals under 8 years old. Up to $5,000.00 per year (inflation adjusted) can be contributed. Distributions may be used for education, small business expenses, and purchase of principal residence by a first-time buyer. Certain requirements exist for a one-time federal government deposit of $1,000.00 for children born between 2025 and 2029
- I want to review more in depth the Health Savings Accounts to confirm the information affected by this law.
- There are numerous provisions that are terminated stemming mostly around energy efficient vehicles.
Business-related tax law changes will either be posted after more information is made available or discussed with business clients as needed.
As more information is gathered from studying the law and webinars are attended, a post will be made if more explanation is necessary on these tax issues.
You all know the deal, if you have questions related to your return, give me a call.
Thank you